By Allen Laman
A challenging legal arena, a continuing talent shortage and alternatives to traditional insurance products are three areas impacting nonprofits today, according to industry reports that recently shed light on headwinds yielding a cloudy outlook for many organizations.
Highlights from several of those publications are detailed below.
“A shrinking number of carriers want to insure this sector,” Alera Group said in its 2024 Market Outlook. “Some are withdrawing from the market entirely; others are leaving certain states or reducing their product offerings.”
Legal Arena Shaping Negative Outlook
In its Spring 2024 Nonprofit Market Update, Gallagher highlighted several legal factors keeping nonprofits in what company leadership described as “deteriorating, unchartered waters in so many ways for many nonprofits.”
In that update, Peter Persuitti, director of Gallagher’s religious and nonprofit practices, pointed to a rollback of tort reform, social inflation, an increase in plaintiff attorney activity and changing jury view of fairness and duty of care as factors causing shaping the sector’s negative outlook.
As states remove the statute of limitations for abuse reporting, for example, reporting by alleged survivors of older claims “has led to a cascade of nonprofit bankruptcies due to the inability to fund mass survivors,” Persuitti said in the report.
Meanwhile, Risk Strategies reported in its 2024 Initial Outlook that carriers are charging nonprofits higher premiums in anticipation of litigation losses, noting that third-party litigation funding and nuclear verdicts “make it impossible to predict total loss costs.”
The insurance brokerage and consulting firm reported that in 2023, claims increased related to molestation, wrongful termination and employment practices liability, as well as professional liability for occupational therapists and other care providers.
Alera Group reported that “despite the controls many nonprofits have implemented, claim costs continue to increase. Nonprofits that serve youth and other vulnerable populations face the greatest challenges in securing coverage.”
Talent Shortage Persists
According to HUB International’s 2024 Outlook, talent retention was the biggest concern for 73% of HUB’s nonprofit survey respondents, followed by talent recruitment at 63% and compensation at 62%.
This workforce shortage crisis was explored last year by the National Council of Nonprofits. The sector-wide network of nonprofits reported that nearly three out of four nonprofits that completed a national survey reported job vacancies.
The NCN found that 51.7% of respondents reported they have more vacancies now compared to before the COVID-19 pandemic. Seventy-four percent of respondents reported vacancies in their program and service delivery positions, and 41.1% reported vacant entry-level positions.
“As nonprofits put more pressure on existing workers and are forced to rely on less-experienced employees, the risks of errors, accidents and compromised service delivery will increase,” Alera Group reported.
New Renewal Approaches
The NCN’s 2023 report found that funding remains a top challenge for nonprofits, noting that 70% reported their charitable donations will decrease or remain flat in 2023 and nearly the same number expect their donor base will decrease or stay the same.
Meanwhile, HUB International reported in its annual outlook that “higher insurance costs are also hurting nonprofits,” adding that commercial auto and abuse and molestation coverage will have the greatest impact on nonprofits’ bottom line in 2024.
“Social inflation has resulted in carriers reducing umbrella limits, leaving often expensive and extremely limited options for protection,” HUB said of nonprofits in the company’s Mid-Year Rate Report.
“Workers’ comp, nonprofit D&O and cyber liability rates have stabilized, providing some relief to more challenging lines of business. Smaller, low-hazard nonprofits are experiencing 5% to 10% rate increases, while larger nonprofits with complex risk issues are seeing increases of 10% to 15%.”
For those entities unable to secure attractive insurance options, risk pooling may be a possibility. In a separate article, Brandon Cole, Area Vice President at Gallagher, shared that nonprofits are starting to look at joining insurance captives and forming risk pools.
“These types of arrangements haven’t been popular in the past, but with budget-busting increases, organizations have to get creative and look for other ways to manage their total cost of risk,” Cole wrote in the piece.
Was this article valuable?
Here are more articles you may enjoy.
Consumers’ Refusal to Keep Paying Higher Prices May Halt Inflation Spike 
Anti-DEI Shareholders Are Attacking Corporate America’s Diversity Programs 
Manufacturers Hit by Soaring Property Insurance Costs 
Debby’s Florida Claims Already Near 12,000 as Yaworsky Says Market Is Strengthening From This Issue
